BRETT STEENBARGER'S TRADING PSYCHOLOGY RESOURCE CENTER

Below are resources to help traders become their own trading coaches, improve their trading processes, and develop a positive work-life balance.  All the TraderFeed posts also contain links to valuable resources and perspectives.  

RADICAL RENEWAL - Free blog book on trading, psychology, spirituality, and leading a fulfilling life

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The Three Minute Trading Coach Videos

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Forbes Articles:

https://www.forbes.com/sites/brettsteenbarger/
  

My coaching work applies evidence-based psychological techniques (see my background and my book on the topic) to the improvement of productivity, quality of life, teamwork, leadership, hiring best practices, and creativity/idea generation.  An important part of the "solution-focused" approach that I write about is that we can often best grow by focusing on what we do well and how we do it--and then doing more of what works for us.  The key is to know our cognitive, interpersonal, and personality strengths and leverage those in the pursuit of performance. 

FURTHER RESOURCES

*  A Creative Way to Use TraderFeed 

*  Brett Steenbarger Bio

*  Brett's Books on Trading Psychology

I wish you the best of luck in your development as a trader and in your personal evolution.  In the end, those are one and the same:  paths to becoming who we already are when we are at our best.

Brett
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How To Become Your Own Trading Coach

 

5/8/2026 - My dream for a next book is to go on the inside at one of the professional money management firms where I work and show, through detailed example, how the successful traders research markets, generate ideas, express their ideas as trades, combine the trades to achieve diversification, and manage the risk and reward.  Out of that would come very specific best practices that individual traders could use to anchor their self-coaching efforts at development.

Of course, no trading firms are eager to give away their secret sauces, so that is why those inside looks are quite rare.  It's great to have interviews with successful traders; even greater to see them in action and adopt them as role models.  How successful professionals coach themselves can become inspirations and roadmaps for how we can guide our own development.

Show me a successful sports team and I'll show you a successful coach.  Show me a successful performing artist and I'll show you mentors and a long process of mentoring.  The trading world is in need of mentors and role models--not influencers and vendors hawking their market calls.  That is why the Market Wizards books are so popular:  real traders offering insights into their exemplary success.  The next step is an ongoing process of market wizardry that can inform and inspire our work on ourselves.  

Stay tuned...

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5/7/2026 - The solution focused approach to coaching that I describe in my books is perhaps the most relevant to our efforts at self-coaching.  Solution work stands the change process on its head.  The usual approach is to examine our problem patterns and make efforts to interrupt and change those.  In the solution approach, we carefully analyze occasions when our problems *aren't* occurring and we see what those have in common.

The big idea is that, when our problem patterns aren't happening, it's because we're doing something right!  When we're not allowing emotions to drive our trading reactively, perhaps that is when we're at our best in preparing trading and staying focused.  If we can figure out how we do that, we create a repeatable solution.

We may feel dysfunctional and damaged, but at times we're already that person we wish to become.  A good coach keeps your strengths clearly in your sight so that you can be more and more consistently your best.  A real time journal, like the one mentioned yesterday but focused on what you do right, can be a powerful tool for becoming your best trader--and your best self!

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5/6/2026 - My favorite cognitive technique for self-coaching is keeping a real time journal of one's thoughts and feelings.  The idea is to recognize when you are feeling anxious, greedy, discouraged, distracted, frustrated, etc. and quickly back away from the situation and fill out a journal entry.  Notice that this by itself encourages you to be the observer of your experience and not someone who is caught up in that experience.  The very act of stepping back from a situation and putting it into perspective strengthens the part of you that is *not* caught up in the problematic trading.

The classic cognitive journal entry works with a sheet divided into four columns.  Column A stands for "activating event" and summarizes what has gone on that is associated with your emotion.  Column B stands for "belief" and it's what you're telling yourself about what has just gone on in the market.  Column C stands for "consequence" and it's identifying how your belief is making you feel.  Column D stands for "disputation" and is your challenge of the negative belief and your effort to respond to the situation more constructively.  

If you do this multiple times per day, you can become very good--and very quick--at recognizing negative thought patterns as they arise, challenging them, and then replacing them with a more constructive outlook.  Eventually you internalize the journaling and can go through the exercise in your head in real time.

The goal is to become very good at "thinking about your thinking":  standing apart from automatic thoughts and replacing them with more realistic alternatives.  If you do this consistently, every day for a month, you'll find that you maintain a constructive perspective far more regularly.

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5/5/2026 - Again and again I hear from successful traders that a large portion of their annual profits comes from a relative handful of trades.  Lots of trades make a little or lose a little, but very few lose a lot, and a few are big winners.  When we explore those big winners, it's apparent that they typically start as good opportunities but at some point show up as great opportunities.  That's what allows the trader to get large in the trade and ride it for significant profit.

This is hugely important to our self-coaching.  If we're busy trying to avoid losses, we'll never get the confidence to go after the meaningful wins.  That occurs in relationships, and it occurs in trading.  At some point, "yeah!" becomes "hell, yeah!", and we go for it.  The idea that great traders avoid emotion during trading is nowhere near correct.  The great traders are entrepreneurs.  They love to build; they are excited by opportunity.  Yes, they manage risk well, but they also go for big success.

What is fascinating for me as a psychologist, is that the big, "hell, yeah!" trades often do not start that way.  They are good ideas, executed with good risk/reward, but they show promise pretty much from the start.  When everything lines up, the trader is inspired to go for it.  Their self-coaching is not just about managing risk, but pursuing unusual opportunity.  They are always asking of their good trades, "What do I need to see to make this a great trade?"

It's an opportunity mindset:  an entrepreneurial mindset.  It's hard to reach for the horizon when we're looking down and making sure we don't stumble.

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5/4/2026 - Too many traders focus on what is setting up as opportunities in markets rather than whether *they* are set up to properly trade opportunities.  Notice that when cruise ships set forth for a transoceanic voyage; when airplanes prepare for a cross-country flight; and when racecar teams are getting ready for events like the Indy 500, there is always an extensive check of systems.  You don't cross the ocean, get in the air, or approach the starting line without having made sure everything is in good working order or else there could be a disaster.  Similarly, traders need their own "pre-flight checklist" to ensure that they are ready to trade.  Some of what needs to be checked is whether the idea has been properly researched and whether rules of entry/exit are in place and some of what needs to be checked is the mindset of the trader:  concentration/focus, energy level, mood, etc.

Maintaining a regular routine of monitoring and renewing your psychology allows you to avoid the pitfalls of poor preparation.  So many times traders are afraid of missing opportunity and put on trades before they're properly planned and focused.  I am willing to bet that, for most traders, P/L would improve significantly if they placed fewer trades and only traded when they were "in the zone".  

The coaching that really matters is the self-coaching that occurs during the trading day.

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5/3/2026 - The most basic technique for changing our trading psychology is to recognize when our concentration has been disrupted by distraction, frustration, or excitement.  In a state of optimal focus and concentration, we are most able to process what markets are doing and implement our trading plans.  Distraction leads us to act impulsively and reactively, leading to suboptimal decisions.

Notice that the solution to anxious and upset feelings is not simply relaxation, taking breaks, or attempts at positive self-talk.  Rather, we want to replace distraction and frustration with calm focus.  This typically requires that we temporarily remove ourselves from screens and control our thinking and breathing.  Meditation skills are very helpful in this context.  By focusing on an image, slowing our breathing, and maintaining a very still posture, we shift the mind by altering the body.  By slowing down our heart rate, focusing our attention, and quieting our bodies, we literally shift gears and return to states of optimal decision making.

As I describe in the Positive Trading Psychology book, this is where brain wave biofeedback (neurofeedback) devices can be super useful.  These tell us in real time when we are in states of focus or distraction as well as states of calm or agitation.  If we practice meditation routines with the biofeedback, we can learn how to calm and focus ourselves on demand.  This becomes a great way to start the trading day, and it is a useful routine for breaks in trading.  

Indeed, if we can learn to focus on demand, this skill becomes helpful in a variety of life situations.  The idea is to respond to challenges in planned ways, not reactively.

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5/1/2026 - I'm in Syracuse, NY as I write this, getting ready to teach classes in short-term (brief) therapies to residents in psychiatry.  I've been on the faculty of SUNY Upstate Medical University since the mid-1980s and have long enjoyed teaching change techniques to psychology and psychiatry students.  In this series of posts, I'll teach a few of these techniques to you so that you can use them to help coach yourself to success.  You'll find more on this topic in the Daily Trading Coach book and in the book that just came out, Positive Trading Psychology.  

So let's start at the beginning and understand the nature of the problems we face.  These problems occur in many situations and they can take different forms, but typically they are part of an underlying pattern.  For instance, we may feel stress, anxiety, and fear in many different situations, but common to to all those experiences might be negative self-talk, where we catastrophize and anticipate the worst.  This can occur in relationships, in trading, at work, etc.  The goal of self-coaching is to understand the patterns that create our problems so that we can step back from those patterns and engage in new ways of thinking, feeling, and acting.

Very often, a key to identifying the patterns that are interfering with our trading is to recognize the thoughts and emotional experiences driving the patterns.  We might, for instance, overtrade in different situations and take large losses.  Driving this overtrading might be perfectionistic demands to participate in every market move and feelings of failure if a move occurs and we don't participate.  For some people, the overtrading might be driven from thoughts, feelings, and experiences of the past:  trying to make up for past life failures.

A technique from cognitive therapy is keeping a journal of all your negative thoughts, feelings, and actions during a trading day and identify what you're telling yourself on those occasions.  Many times, the patterns will jump out at you:  you'll see habit patterns of self-talk that lead to negative emotions and poor trading.  The first step in the change process is to recognize our problem patterns in real time.  Keeping a real time journal of our thoughts, feelings, and actions is a way of helping us recognize those problem patterns.  In coming posts, we'll explore techniques for changing the patterns we recognize.

Mistakes Traders Make

 

4/30/2026 - It was great meeting with a group of traders for the "ask me anything" webinar with Agnieszka Wood.  A couple of mistakes were addressed in the session very effectively.  Agnieszka discussed the mistake of trying to fix our trading before we've addressed the emotions we've been going through during difficult trading.  It is all too easy to become reactive when we're frustrated.  Stepping back from trading temporarily, recentering, and renewing our search for edge is an effective way to respond to loss.

Peter Robbins raised another great point.  We had been discussing the importance of getting big in trades when our edge is playing out and he noted that there are some environments in which it is not prudent to get big.  That is certainly true of highly volatile, uncertain markets.  Volatility gets us big by itself!  Good risk management takes market environment into account.

As I explain in the Positive Trading Psychology book, the quality most common to great traders is intellectual curiosity.  Great traders love the hunt for ideas.  They love to discover.  That keeps them engaged even when they have small positions in the market.  And that's what gives them the inspiration to put on larger positions.  The best traders love the discovery process every bit as much as they love trading!

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4/29/2026 - Perhaps the greatest mistake traders make is not making enough mistakes.  The trader who is innovating is always going to be getting things wrong, fixing them, and learning in the process.  Avoiding mistakes too often means avoiding growth.

Years ago, I contrasted a Japanese car maker's operations with those of a U.S. car maker.  The U.S. manufacturer ran the assembly line at a moderate speed, ensuring that line workers would keep up with the flow and make a minimum of mistakes.  Indeed, if they had sped up the line, they would have heard from unions in a hurry!

The Japanese company, however, sped up the line every so often and then scanned to see where things broke down.  They would then fix those areas, maintain the higher speed, and then speed things up some more.  The U.S. company saw flaws in the assembly line as something to avoid; the Japanese company sought flaws for continual improvement.  Which company do you think had a track record for most reliable vehicles?

There's an important lesson here.  As long as we're managing risk the right way, we want to embrace our losses and use them as fuel for our improvement.  Avoiding mistakes is perhaps the most subtle of all mistakes.

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4/28/2026 - The problem that beginning traders make is that they are too eager to take risk before they've developed robust processes to guide their generation of ideas, sizing, risk management, trade review, etc.  The problem that experienced traders make is that they are fully grounded in routine and don't spend enough time and energy developing new sources of edge.  In the first case, the trader is too eager and takes imprudent risk.  In the second case, the trader lacks inspiration and lacks novelty and innovation.

It's not so unlike the problem that occurs in romantic relationships.  They start with excitement and newness and run into challenges channeling that energy into daily coordination of individual needs.  Over time, the constancy of daily routine makes it necessary for couples to find new energy from fresh interests and activities.  

Every relationship should be comfortable and stimulating and challenging.  Our relationship with markets needs to be comfortable enough that we can handle day to day challenges, but also stimulating in the exploration of new sources of edge.  

Success is a balance between stability and innovation.  Without excitement and curiosity--and a stable way of channeling those--trading (and our market edges) grow stale.

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4/27/2026 - I've consistently found that the majority of directional traders make their living from managing risk well (not having large losing trades) and from having (often only a handful) of large winning trades during a year.  They make their money when they are *really* right and they take advantage of that.

The big mistake that traders make, leaving them as good traders but not great ones, is that they have a clearly defined criteria for finding opportunity and identifying entries and exits.  They *don't* have a clear process, however, for taking full advantage of those situations when they are *really* right.  In other words, they don't have a clear process for getting big in the right trades.

This is partly a trading psychology issue.  Traders clearly visualize being wrong but not being amazingly right.  They have a process for limiting losses, but not maximizing gains.

They think cautiously and prudently, but don't think greatly when the proper time comes.

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4/26/2026 - What makes our trading psychology is not whether we make mistakes, but what we do with those mistakes.  In the coming series of posts, we'll take a look at common mistakes traders make and how they can use those mistakes to improve their trading.

An unfortunate number of traders have missed the bulk of the large upside move in stocks since the lows late in March.  Out of a sense of prudence, they didn't want to "chase" the rebound and so waited for a pullback.  The anticipated pullback simply hasn't occurred.

As the late Ayn Rand taught, when things don't make sense, it's worthwhile to check our premises.  What's the premise that traders are relying upon that is leading them to miss opportunity?

Quite simply, traders are assuming that pullbacks are measured in price action alone.  If we don't see a correction in price, traders assume we haven't seen a correction.

But suppose we measure correction in other ways.  For example, off the late March lows, we subsequently saw breadth--as measured by the percentage of stocks trading above their three-day moving averages--pull back to 47.47 on April 7th and then back to 32.39 on April 10th and then back to 49.39 on April 15th.  All of these pullbacks occurred at higher price levels, because a few groups of stocks kept the averages higher even as the bulk of stocks retreated from their recent highs.  From a breadth perspective, the powerful rally offered *many* opportunities to get into the rally.  

Price alone does not define the market. 

What we look at determines how we trade. 

Asking New And Better Questions

 

4/24/2026 - The best questions are sometimes the ones that you discover.  I like collecting market data and then observing and backtesting for historical relationships.  I know that the past is far from a perfect predictor of the present, but I also know that if several different historical studies are pointing in the same direction, there's a worthwhile hypothesis to be entertained.

For example, when the market recently rocketed higher after considerable weakness, we got to a point where just about everything was rebounding.  I track the number of stocks in the NYSE universe that give buy and sell signals on a variety of technical indicators.  (See the Market Charts site for historical data).  Very few stocks were displaying sell signals following the bounce, indicating the breadth of the move higher.  When we look historically, the market may pause in the near term, but tends to go significantly higher in the weeks ahead.

Interestingly, it's the lack of weakness that predicts strength.  When we collect historical data and ask the right questions, new patterns show up to guide our thinking and our trading.

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4/23/2026 - Some of my best work with traders occurs when I sit in on team meetings and observe how productive those meetings are.  What is a productive team meeting?  It's one where team members question each other and gather new information.  It's also one where team members challenge each other's views, add to those views, and offer related or different views.  The best team meetings are highly active and interactive.  

The less productive meetings are rote.  Each person talks in turn, there is little dynamic interaction, and everyone goes away feeling like they've gotten an update, but not necessarily an insight.

Of course, traders trading on their own have no such teams.  There is no one to challenge them, no one to stimulate them, and no one to hold them accountable for their plans.  Having just one trading buddy can greatly broaden what you do and how you do it.  The best trading psychology is a dynamic one, where we're stimulated, inspired, and challenged by those we respect.  A great deal of the frustration traders experience (see the upcoming free webinar I'll be doing with Agnieszka Wood) is a function of their isolation and their inability to ask the right questions and get the right answers.

Teamwork makes the dream work.

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4/22/2026 - This set of questions was inspired by an interaction with a trader a while back.  Suppose you went to your physician and found out that you have an aggressive tumor and that the cancer was beginning to spread.  Removal of the tumor and radiation treatment of the area where the cancer had spread would maximize your health going forward.  Realistically, however, you can only expect to live another several years.

What do you want to do in those several years?  What haven't you done during your life that you'd want to tackle in the time remaining?  What role would trading play in your life over those next few years...or would it play a role at all?  What would you want to do in terms of family activities and relationships?

A scenario such as the one above forces us to prioritize what we do and who we do it with.  It especially prods us to identify the role of trading in our lives and how important it truly is to us.  Time is finite for all of us.  What is important is to live that time without regrets.

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4/21/2026 - Take a look at your daily, weekly, and monthly returns for the past year or two.  Take a look at index returns.  Have you been making money?  Have you outperformed the index?

Calculate the number of winning and losing trades over that period.  Have you been successful in finding opportunity?  Have you been consistent in finding opportunity?  Have there been market periods/environments in which you've found particular opportunity and in which you've failed to find opportunity?

Calculate the average size of your winning and losing trades.  Have you been successful in letting winners run?  Have you been successful in limiting the losses of losers?  What has been your Sharpe ratio?

Calculate the running three-month correlations between your returns and overall index returns.  Are you making money in unique ways, relatively uncorrelated with what the overall market is doing?  

These are but a few of the ways a professional trading firm would evaluate you if they were to hire you or allocate you capital.  Do you evaluate yourself with this kind of rigor?  Would you invest in the trading of someone else who had your track record and your review process?  

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4/20/2026 - Macro traders at hedge funds will look at news items, economic data, and central bank activities to identify what might become a trend in various markets.  Day traders at prop firms will look at charts on different time frames, observe patterns of volume, and figure out what is setting up as a profitable trade.  Good traders dig for information, and they assemble their observations into views that they can trade.

Review processes provide opportunities to ask different questions:  What trades worked, why did they work, and what did I do to take advantage of the opportunity?  What trades didn't work, what went wrong, and what can I learn from that?

The question I've found most helpful to add to the above is:  What kind of market are we in?  Are all stocks moving in one direction, or are sectors doing very different things?  Have we moved from rotational activity to broadly trending activity?  Are we seeing a thrust in breadth and how has that played out historically?  Are correlations among the various sectors breaking down?

Good questions address how to trade the market.  Great questions ask what kind of market we're in and how we're meant to adapt our trading to the evolving market regime.

Speed of adaptation is central to trading success.

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4/19/2026 - I can almost always recognize a promising trader or investment team when they ask unique questions and search for answers in new and different places.  Creativity begins with originality of thought.  We put information together in new ways; we seek out new information.  We don't just look to improve what we're doing.  Rather, we look to do new things.  

The best teams and traders are like the most successful businesses.  They innovate.

Innovation starts by examining new data and old data in new ways.  That's how we get to new and better questions.

The other day, I thought about analyzing stock market data in a new fashion.  Instead of looking for patterns of strength, weakness, volatility, etc., I wondered about the times of day in which the broad market trades most predictably.  In other words, imagine that different time periods are different markets.  Then consider backtesting market patterns/setups for each time period.  When do our trade ideas work best and worst?  How could that inform how we think about (and size) our trades?  Are there market patterns that play out at different times and over different amounts of time?

And what if the patterns play out over different volume regimes, not just time?  

As artificial intelligence capabilities become more a part of the trading universe for individual traders, success will become a function of asking more and better questions and quickly implementing solutions.

How Mindset Helps Us Win

 

4/17/2026 - A big mistake is to think of mindset purely in emotional terms.  Imagine two intersecting dimensions drawn as X and Y axes.  Positive/negative mindset might be the Y axis, describing our emotional mind frame.  The X axis might be focused/distracted, capturing our cognitive state.  We can be distracted because we're fatigued or disorganized in our process, not necessarily because of emotional factors.  Focus does not have to imply freedom from emotion.  That sniper who is laser focused on a target is also in a super aggressive state.

Of course, the worst quadrant for trading is to be negative in our emotionality and distracted.  The two feed one another.  When we are positive in our emotional state and opportunity focused, that is when we are most likely to be open to what markets are doing and receptive to patterns that emerge.  One reason I like to start my market day with research is that it is inherently opportunity-focused.  

A great exercise for breaks in the trading day:  Draw the X and Y axes and then identify where you're at in your focus and your emotional state.  Stepping back from trading and getting back into sniper mode through biofeedback, meditation, visualization, and searching/researching can turn your trading day around and build the right habits for your trading psychology.

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4/16/2026 - What upsets the mindsets of many traders is frustration.  They don't want to lose money and they wait patiently for a good entry setup and the market roars ahead without them.  They are careful to not lose too much money and end up stopping out at the worst time.  They want to make money, markets are slow and choppy.  All of these are frustration scenarios that traders are familiar with.

Another kind of frustration is frustration with ourselves.  We don't do our homework thoroughly and miss an opportunity.  We break one of our own rules and lose too much money.  We take a vacation at the worst possible time to be away from screens.  

All of us have been there and done that.  It's not that successful traders don't get frustrated; it's that they channel their frustration productively.  Very often, we're frustrated because we know better and sense that we could be making better decisions.  The frustration can become a prod to tighten up our processes and do the right things.

In the upcoming "Ask Me Anything" webinar with Agnieszka Wood (Wednesday, April 29th at 7 PM ET), we'll be fielding questions from traders and helping them use their frustrations for self-improvement rather than self-blame.  Our frustrations are there for a reason and have something to teach us.  I look forward to learning together!

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4/15/2026 - Here's a mindset factor that I've found consistently differentiates the best from the rest.  The majority of traders reach out for coaching help when they're struggling.  By that time, they've tried everything they can think of.  It hasn't worked, and they're frustrated.  A big part of the coaching is getting past that frustration so that they can approach opportunity and risk in a different way.

The best traders and teams, however, reach out when they're doing well.  They are energized by their success, and they're looking to grow their businesses.  Their goal is to get to that next level of success, and to do that, they have to understand what has worked for them to this point and how they can build upon it.

In the majority of cases, the request for coaching is driven by need.  Among the best traders, however, the coaching is all about defining, expanding, and achieving a vision.  It's great to identify and correct weaknesses--all great performers do that--but simply eliminating the negative will not achieve the positive.  As I mentioned in my recent talk at the SMB summit, you are meant to do something great.  The right coach never loses sight of who and what you're meant to be.

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4/14/2026 - Quite a while ago I wrote a blog post called The Devon Principle.  If you weren't around 20 years ago when I wrote it, it's worth a read.  The basic idea is that we are always absorbing life experience.  What we do and who we do it with become parts of us.  Many times, we find ourselves in the wrong mindsets--with diminished energy and productivity--because we're doing things in life that don't play to our strengths.  The wrong jobs/careers, the wrong relationships:  these drain us.  When we are doing what we love doing and do best, our efforts *bring* us energy.  

What about the *process* of trading most excites you, plays to the best within you, and represents your unique talents?  If what excites you is merely P/L, you'll always be vulnerable during inevitable periods of drawdown.  The key to success is finding a way to engage markets that also engages what we love doing.  

Life is way too short to be lived without passion.

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4/13/2026 - How does mindset help us win in life?  In the middle of the night it came to me:  In an ideal mindset, we approach life as venture capitalists, looking to invest ourselves in people and activities that are amazing, unique, and promising.  Put yourself in as many interesting situations and opportunities as possible.  The adventure is seeing what stands out as worthy of investing your time and energy.  That mindset sees the world as a place of limitless creativity where there are always people who inspire.

Too often, in markets and relationships, people focus on how they can avoid getting hurt and so they never truly invest themselves in the opportunities that are all around them.  When Margie and I went on a cruise to Alaska, we were amazed at the icebergs and the wildlife on those.  Our ship was too large, however, to get very close.  So we rented out a small boat and an experienced guide and went right up to the birds and seals and caught a sweet view of a whale.  It was a bumpy ride, and it led to a lifetime of memories.

Dream often.

Dream big.

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4/12/2026 - If I had to identify one mindset quality setting successful traders apart from the others, it would be a *hungry* mindset.  The really good traders actively look for where they might be wrong.  They love information and making sense of information.  They dig and dig:  in news reports, in conversations with other traders, in their readings.  Because they're integrating more information, their views tend to be more nuanced.  For instance, they'll dissect an inflation report, drilling down to various parts of the economy, to identify relative winners and losers.  They don't just say, "Stocks are going down because inflation is rising".

The desire to know--that intellectual curiosity--came through as a primary predictor of success in the research I conducted at several hedge funds.  Very often, the confident mindset and the defeated mindset are focused on one or two things, such as recent wins and losses.  When a trader hungers for the big picture, they're more likely to come up with multiple ideas and big ideas.  The best traders demonstrate that intellectual hunger in other parts of their lives and at previous points in their life histories.  It's a talent, not just a skill.

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4/10/2026 - It's been fascinating to see who has done well--in terms of trading psychology and in terms of P/L--during this recent period of volatility, correction, and rebound in the stock market.  My most striking observation is that the most successful traders during this period are among the most successful traders in general.  They have succeeded by focusing on opportunity during periods of threat and focusing on threat during periods when they were making money.  The traders who have struggled have been rather uniformly optimistic or pessimistic.  It's the flexibility of perspective that has distinguished the recent winners.

For the recently successful traders, it's as if they are looking for what is stretched and where they might take profits or hedge when things go their way.  When things are going against them, they're looking for areas where good trades now are becoming great trades.  They are sized in such a way that they are never really big or small in an idea...they always leave room for getting bigger or smaller.  Instead of trying to predict how things will go in world events, they're creating multiple scenarios and preparing themselves to pounce once one of those is playing out.  

A flexible mindset creates flexibility in trading.

What Inflation Does To Stock Market Investments

 

4/9/2026 - Thanks to Mike Bellafiore and SMB Capital for this video of my talk at the recent SMB Summit.  The talk builds on the topic of positive trading psychology, emphasizing that all success in trading comes from talents *that we already possess*.  The role of training is to instill the learned skills that leverage those talents.  The role of coaching is to guide and help implement this training.  You can see below, in yesterday's posting, that the collection of data and running of analyses is one of my talents.  Talents can always be recognized because their exercise produces meaning and fulfillment.  Digging deeper and creating understanding makes all the hours of data collection and analysis worthwhile for me.  

But talent is not skill.  Just because one can analyze market data doesn't mean that they can translate that understanding into profitable trades.  Mentoring is all about modeling the process of turning insight into action.  As the video indicates, what I saw in SMB was a program that provided that modeling day after day for developing traders.

Because we have a ceasefire doesn't mean that oil prices will return to their recent lows, stimulating economies.  The damage that has been done to production facilities and the ongoing conflict over control of the Strait helps ensure that energy prices will remain high, contributing to inflation and weighing on economic growth.  I will be using my analyses to identify which stock market sectors are most and least vulnerable going forward and structuring trades on that basis.  When market action lines up with analyzed market edge, there we will find unique trading opportunity.

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4/8/2026 - With the overnight ceasefire, we see estimates of inflation (especially as reflected in oil prices) coming down and stocks rallying significantly.  I went back to 2006 (over 4900 market days) and looked at all occasions when we closed with over 80% of all stocks above their 3- and 5-day moving averages, but less than 50% of stocks above their 50-day averages.  That represented only 157 of the days.  Near-term returns in SPY (next five days) underperformed and were barely positive, but over 20 days, the upthrust days significantly outperformed (+1.69% vs +.78% for the rest of the sample; 105 days up, 52 down). That outperformance continued to out 50 days.  

This is a great example of how many of the directional edges in the stock market play out over time frames longer than most traders are looking.  In the current market, it may well be that the oil market will be a sensitive gauge of whether peace or conflict will prevail in the Middle East.  What market history is telling us is that near-term pullbacks are often valuable entries for medium-term upside momentum following bullish breadth thrusts.

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4/7/2026 - I'm seeing a number of articles in the media outlining the potential impacts of crude oil going above $150, emphasizing the impact of higher energy prices on consumer confidence and consumer spending.  A number of the traders I work with are therefore carefully monitoring crude oil and natural gas prices and assessing how these might affect countries that are importers vs. those that produce and export energy.  This is a great example of how world events lead to investment and trading themes that find diverse expression.  Inflation would not affect all markets and all countries equally, setting up potential opportunities for market participants, even as there are broader economic threats.

Indeed, my AI summary of this topic indicated quite a threat to oil exceeding $150/barrel (see below).  Conversely, indications of renewed production would be especially helpful to estimates of future growth.  All eyes will be on oil and related markets near term.

"Crude oil at $150 per barrel would likely trigger a severe global recession, a substantial rise in inflation, and intense volatility in financial markets. This price surge, equivalent to a major tax on consumers, would stifle demand, cause gasoline prices to potentially exceed $6–$7 per gallon in some regions, and force sharp contraction in manufacturing."

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4/5/2026 - Here is a chart of historical stock market data that, unfortunately, may be of increasing relevance.  Please note the following:

*  From 1929 to 1949, the Standard and Poor's 500 Index, measured in inflation-adjusted terms, went from 545 to 193, losing over half its value in a 20-year period.  

*  From 1968 to 1982, the inflation-adjusted index went from 957 to 359, again losing over half its value.

*  From 2000 to 2009, the inflation-adjusted index went from 2860 to 1226, once again losing over half its value.

The good news is that, over the broad span of history, stock prices--even in inflation-adjusted terms--have been in a bull mode, rising over 15-fold since 1982.  The bad news is that there have been significant declines along the way that hurt investors near retirement.

Since 2009, the Index has risen over five-fold in inflation-adjusted terms.  Now we see rising oil prices and signs of rising inflation and the beginning of slower growth.  We see long-term rising debt in the economy.  

History teaches us that we may be entering a period in which the return of our assets becomes as important as the return on our assets.  

Lessons From Working At Hedge Funds

 

4/3/2026 - How can a trader achieve outstanding returns by trading patterns that everyone else is looking at:  the same indicators, the same charts, the same information?  Uniquely positive returns come from unique trading ideas.  Like any great entrepreneur, the great trader has to innovate.  Simply duplicating the competition won't stand out.

The best traders I've worked with are looking at things that others haven't even considered.  One trader, for instance, tracked the best trade of each day in the overall market and fed information about those opportunities to an AI engine for modeling.  Now, he gets alerts when those best opportunities are setting up.

Another trader has succeeded by asking new questions.  For example, he studied times of day when his market behaves most predictably, given a set of market indicators.  He only trades those times of day when opportunity sets up--and he trades those occasions with meaningful size.  A big part of his edge is not trading when markets are less predictable.

The real edge for these traders is twofold:  1) the creative ability to ask new questions; and 2) the willingness to dive into market data and market tools to get new answers.  When they make new discoveries, they experience excitement, but also the confidence that comes from finding your own niche and understanding it deeply.

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4/2/2026 - Success among professional market participants is a combination of investing and trading.  As investors, portfolio managers research market themes and historical patterns and enter core positions that they hold over time.  For instance, they may perceive an increase in inflation and a rise in fuel prices and will look to profit from that development by expressing views in fixed income (bond), equity (stock), and commodity markets.  Perhaps they will be long the assets of energy-producing countries and short those that are energy-dependent.  That might be combined by shorting consumer discretionary shares and buying commodity-related stocks.  Altogether, they create portfolios of multiple positions expressing multiple themes, so that--even if they're wrong in one view or position--they can profit in others.

As these positions move, the best market participants update risk/reward and either add to their positions (if new information and/or price action confirms their core views) or trim.  Their goal is to minimize damage if themes aren't playing out and maximize reward if their view starts working.  In regularly adjusting their positions, they are traders; in holding a variety of assets expressing a variety of views, they are investors.

Individual, active traders achieve this diversification sequentially:  They track many stocks/assets and will find patterns to exploit as they move from one stock/market to another.  Even if they are going flat at the end of each day, they have core positions in something they like--i.e., they act as position traders--and will add and trim risk if short-term movement and news go for or against them.  The basics of success are similar, combining an overall view with a navigating of risk/reward as positions are open.  Much of the success of a portfolio manager or an active trader comes not just from their views, but from how they manage risk and reward while holding those views.

Notice how this active management of risk and reward also helps them navigate the trading psychology of being risk-prudent and being risk-seeking.  The successful trader is cautious *and* confident.

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4/1/2026 - What I've seen among the best performing traders at hedge funds is that they study market history, not just current charts.  They use historical studies to identify whether there may be a directional edge going forward.  So, for instance, if an inflation report comes out hot, they'll look for all occasions in the past 20 years or so when we've had such a report and they'll track which assets performed best and worst; which stock market sectors benefited most and least; etc.  Many times, there won't be a dramatic edge, but sometimes a pattern stands out that becomes a hypothesis going forward.  *Then* they'll look at charts to identify favorable entry points to manage risk/reward.

So, for instance, yesterday we had a nearly 3% jump in SPY.  That is unusual; there have only been 49 occasions out of around 4000 since 2010 when a similar rise has occurred.  The average return over the next five days has been negative, but quite positive over the next 30 trading days.  Perhaps more important, the next five day volatility has been over twice as high following the big jump compared with the rest of the market sample.  This little study then invites further investigation of price paths for the most bullish and bearish outcomes, so that the trader can update the odds of directional movement day by day and trade accordingly.

What I've learned by working with these traders is that they don't spout their views.  They let history give them ideas and they're quick to turn those ideas into opportunities.

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3/31/2026 - Years of working with top hedge funds and hedge fund managers have taught me how important it is to know--and accept--when you're wrong.  The great traders know that they'll be wrong close to half the time on each directional trade and they accept that in advance.  They plan for being wrong with stop loss points that become automatic exits.  For them, a losing trade is information.  What they expected didn't materialize.  That says something about the market.

But the really great traders?  They are quick to recognize the moment when the market tells them they're right.  In other words, they see in real time that their ideas are playing out and they are quick to get big in those trades.  They know when and how to pounce on opportunity.  They're like the poker player who is willing to muck one hand after another, losing small money, but who will not be afraid to bet big when the odds are on their side.  

The market is always dealing us cards.  The great traders know in advance what they need to see to really go after a clear opportunity.  They plan, not only for stop loss, but for go win.  They blend caution and aggressiveness, like a lion waiting in the brush ready to strike at the right moment.

It's not at all that the best traders win all the time.  They go through drawdowns and periods of flat performance.  It's those few times each year when everything lines up for them that they make their money.  Being prudent and limiting losses is necessary for success; being aggressive and maximizing opportunity is necessary for great success.

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3/30/2026 - Once upon a time, the big innovation at hedge funds was trading as teams rather than as solo portfolio managers.  Teams could manage more money and indeed were self-managing.  The best of the teams, powered by leadership, helped junior members (who typically were analysts) become risk takers/traders/investors.  But now things have changed.

The new teams are much larger and consist of members with a variety of strategies and market specializations.  They act like a trading firm within a trading firm.  Within the team are "pods", where a more senior member is assisted by juniors and helps those juniors develop.  The larger team structure enables the members to keep each other abreast of developments around the world and across markets.  Everyone shares research and insights gained from interactions and observations.  It is an enriched environment.

But now the teams are different still.  They are decentralized, where the pods operate in different parts of the world.  Some team members might be in the U.S., some in London and Europe, and some in Asia.  This enables the big team to stay abreast of global news, data releases, and markets in real time.  Everyone communicates with everyone and--every so often--everyone gets together in one location for bonding and team building.  These teams are quite successful in recruiting talent, because they don't necessarily need traders to relocate.

Smart individual traders can learn from this.  They can team up with other traders with complementary skills and experience, so that each one is learning from every other one.  The team can link with a community and create teams of teams, tracking different stocks/markets/regions of the world and quickly identifying shifts in market themes.  The lesson I've learned from years of work at hedge funds is that the business is always changing and we have to be ahead of the curve with our own evolution.  Spending our time making better horses and buggies will be of limited value when others are developing automobiles.

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3/29/2026 - As I move toward retirement, I look back on my work at multiple large ("multistrat") hedge funds and all the lessons I've learned during that time.  This series of posts will capture some of those lessons.  

The first lesson is that of professionalism.  Once in a great while I've seen portfolio managers puff themselves up, point the finger at themselves, and make it clear to everyone that they're at the top of the world.  I've never seen those managers last.  Rather, the successful managers always feel as though they don't know enough.  They scour for more news, they talk with more colleagues, they perform more analytical studies.  If they feel confidence and conviction, they double down and look for what they might be missing before acting on how they feel.  They invest in themselves, learning new skills, strategies, and markets, because they know that markets are ever-changing.  I see it now in terms of the applications of AI to trading and in new forms of teamwork in trading.  I see it in terms of new and different market research.  

As I write this, the overall stock market is in a downturn and has failed to bounce from short-term oversold conditions.  A few traders I've spoken with have been buying, convinced that this is a time to pick up bargains.  Others, fearful of the situation in the Middle East and the debt overhanging the economy--as well as the deterioration of high-yield markets--have taken a very defensive posture.  One successful manager I've spoken with has gathered decades of market data and  investigated markets in history that have behaved similarly to the current one.  

That manager is not bearish.  That manager is not bullish.  That manager is curious.  Because he learns, he earns.

Positive Training Psychology

 

3/27/2026 - Traders commonly think of markets as either rangebound or trending.  Many trading signals reflect shifts from range mode to trend mode, attempting to catch the momentum of this transition.  

A different way to think about markets is as a combination of short, medium, and longer-term cycles.  Indeed, many commonly used market indicators, such as RSI, attempt to capture such cyclical behavior.  

A big part of the training I've gone through in markets is learning to identify market cycles and their turning points.  From this perspective, a trend is simply the upside or downside phase of a cycle; a range market represents turning phases of cycles.  As John Ehlers has shown, correlation is a trend indicator and a cycle indicator.  When cycles are aligned, we have "trend"; there is high correlation among stocks to the upside and downside.  When correlation begins to come down, we typically are seeing a divergence of cycles, leading to more rangebound markets.

Reviewing markets day after day, identifying the interplay of shorter and longer-term cycles and the rise and fall of correlation, helps us adapt to shifting market conditions.  How we trade strong trends when cycles are aligned and correlation is high is different from how we trade range markets where cycles are not aligned and correlation is falling/low.

The active trader thrives on pattern recognition.  When we think in cycle terms across timeframes, patterns become more than shapes on a chart.  They suddenly make sense.

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3/26/2026 - The guru who will lead you to profitability in your trading can be found within yourself.  This may be the most important lesson in trading psychology and training psychology:

In some ways, at some times, each of us is already the person we wish to become.  The aim of our development is to discover who we are at our best and to be that person more and more consistently.

The path to greatness lies within us, in the actions we already perform greatly.  Our challenge is to figure out where that greatness lies and how we can access it in our relationships, in our work, and in our trading.  The essence of positive trading psychology is to build what is already positive in us and in our trading.

If our trading is to become consistently successful, it has to consistently access the best within us.

I write a blog about cat rescue and the four rescue cats in my home:  how they've gone from homeless and often frightened animals to loving family members who have bonded with each other.  The blog is not written for popularity; it's there to remind me of who I am at my best.  If my trading ignores that reality and becomes all about P/L, I cannot learn and grow.

The best training psychology has to be grounded in the psychology of what we do at our best.  Everything else is distraction.  Be. Your. Own. Guru.

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3/25/2026 - We've seen it in recent markets:  traders have trouble adjusting to markets that display high volatility.  Their training is grounded in a particular volatility regime and they are accustomed to holding positions for a certain period of time.  When volatility expands greatly, there is much more movement during each time period.  Unable to make the adjustment, traders who were doing well in one volatility regime now find themselves whipped in and out of positions.

As I've shared in the past, a breakthrough in my own trading has been to track charts and indicators where each bar represents a unit of volume, not a time period.  Thus, for example, we might draw open/high/low/close candles for each 50,000 contracts traded in the stock index futures.  When markets get busier/more volatile, we draw more bars; when markets slow down, we get fewer bars.  That means that, for a given pattern (such as a moving average crossover), we will get more signals in busy markets; fewer when markets slow down.  This allows us to not get whipped around in the volatile markets, and it prevents us from overtrading slow periods.

For training purposes, we can make use of replay platforms where we can replay a market day bar by bar--and we can change the speed of the replay.  This also helps us to adapt to slower and busier market conditions.  The volume-based bars help us perceive in real time when a market is picking up volume, when buying or selling is drying up, etc.  Those volume bars also help us see how well volume is able to move the market.  Small bars for a given volume unit mean that the volume is not able to move the market very much.  Range expansion on a bar--on a breakout, for instance--tells us that control of the market has changed.  

We achieve a positive training psychology when the patterns we follow make sense to us.  Seeing volume and price interacting in real time trains us to see when control of the market is expanding, contracting, and changing.  Replaying those scenarios again and again is the most lasting way of building confidence and conviction in our trading.

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3/24/2026 - A valuable aspect of the training exercise described below is that, over time, you can categorize market conditions and see how trading opportunities set up in volatile markets, quiet markets, range markets, trending markets, morning markets, afternoon markets, etc.  Just as a general will employ different strategies in mountain warfare than in desert warfare or ocean warfare, we want to be prepared to win in unique market environments.  Many, many times traders fail to perform because they are employing the tactics successful in one environment long after that environment has changed.  Adaptability of mindset and trading style is key to the mastery of the active trader.

Once we have a scheme for categorizing various market environments, we can then review our trading and identify what we do right and what we do wrong in each environment.  By studying winning and losing trades as a function of market condition, we grow our adaptability and create a grounded sense of confidence in shifting market conditions.  

When I first learned trading, I printed out charts of the market and categorized those by market condition, marking up each chart to identify the opportunities and also highlighting mistakes I had made.  I grouped these printed charts by the type of market we were in and, over time, built an encyclopedia of charts to study best trades in each environment.  

Traders who understand market condition and how to adapt to market condition don't go on tilt.  They are prepared.

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3/23/2026 - In any performance field, professionals are always in training.  It is not an activity limited to new, developing performers.  From football teams to musicians, there is always practice and there is always new and different performance.  A trading process without a training process cannot adapt to new markets and conditions.

The exercise I have found most helpful in my development was to track, at the end of each day, the one or two best opportunities in the market I was trading (stock index futures).  I diagrammed and summarized how those best trades set up with respect to time of day, volume, movement relative to moving averages, larger contexts of time frame, overbought/oversold indicators, indicators of supply/demand (such as NYSE TICK), etc.  Day after day, market after market.

Clearly this is training in pattern recognition.  It's a bit like the radiologist reading one X-ray after another with feedback to gain a sense for the nuances of each.  What I found is that the clearest patterns did not necessarily occur at absolute market tops or bottoms.  Rather, we would rally after making a low or sell off after a high and then the next round of selling or buying would be unable to push the market to new lows/highs.  In other words, the most reliable entries occurred after an absolute low or high had been established.  That provided an excellent risk/reward entry, because there was a logical stop out level if the market made a further low or high.

Tracking indicators for each of these opportunities gave me a sense for which ones worked best in slower markets, busier markets, trending markets, range markets, etc.  By grouping the best trades of the day by market condition, I found the best signals for different market conditions, different times of day, etc.  By tracking these best trades going forward, I could also identify the best signals to exit trades under different market conditions.  For instance, it was here that I found the anchored VWAP described by Brian Shannon to be particularly useful in staying in trades and logically exiting them.

What happens when we train ourselves in pattern recognition is that we become more familiar with patterns, more comfortable trading them, and more confident in our trading psychology.  There is no room for FOMO, revenge trading, and impulsive trading if we're grounded in pattern recognition.

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3/22/2026 - For the developing trader, a positive trading psychology begins with a positive *training* psychology.  How we approach our development shapes our developmental path.

It's amazing how many traders recognize the need to follow a trading plan, but don't structure their development along a training plan.  It's like going to the gym and randomly working on various stations and weights.  Are we really going to achieve an aerobic fitness integrated with our fitness of strength and flexibility?  Notice how professional athletes invariably work with professional trainers.  The goal is to get the most from each session--and to get the right things from each session.

Left to our own devices, are we truly going to test and push our limits?  Will we even keep score and know if we're getting better?

A platform such as TradingSim allows a trader to replay a market bar by bar, track relevant indicators, make trading decisions, and see how those decisions work out--all without risking any money.  It is a kind of gym where we can work on selecting the best opportunities, finding the best risk/reward entries, managing risk and positions, etc.  This is especially helpful for day traders, who can practice identifying the kind of day we're in and figuring out how to best trade it.

Notice how this is practice in pattern recognition, but also practice in executing trading skills.  We can track our simulation P/L and identify--specifically--the parts of our game that we need to work on.  Maintaining a positive training psychology--coaching ourselves for progressive improvement--is key to maintaining a positive trading psychology.  Through practice trading, we can practice the skills we need to coach ourselves to success.  

How we learn determines how we perform.